Contracts, Termination, Repudiation and Rescission

[pandora]

Re: Contracts, Termination, Repudiation and Rescission

The new owner is Arrow Global - Freds doing the dirty work of sending the "pay us some money" letters.

I assumed (without legal knowledge I must add), that Arrow Global would not be able to issue my OH with a new DN - (with say him satisfying the DN - and they then becoming his Creditor) - as they are not a regulated lender as the OC (a bank) was - but the I'm not au fait with DCA rights post sale.

Also, AG - if they issue a corrected DN - would then have to have the previously recorded DN removed, as technically my OH would have satisfied it. But, the orig DN was registered under the banks name - so IMHO I would think that it would need to be the bank whom originally registered the DN, to also give direction to the CRAs to remove it.

The account was sold by the bank during dispute, a CCA was supplied with some areas we wanted clairification of .... the bank never responded to any letters - and the next we knew my OH recd a letter from AG - advising him of the sale from the bank to themselves.

We have responded to them advisng of the dispute, and that the account was illegally sold by the bank whilst our complaint remained unresolved, also advising that the account had been (pre-sale) unlawfully repudiated and terminated by the bank following their failure of the issued DN, to comply with the terms of The Consumer Credit Enforcement, Default and Termination Notices) Regulations 1983 (as amended in 2006) . They were also advised that by vitrue of this breach, all future benefits under s87(1) had been forfeited (although I didn't inform them that they were entitled to genuine arrears at the time of default .... thats for me to know and them to find out !!)

They have not challenged this or even acknowledged this area of my response to them, and just sent at the beginning of the year, a template "lets come to an arrangement" requeste.

Whilst they are not baying for blood just yet ... I think it would be wise for me to just have a bit of knowledge following recent developments, and to have something already prepared to respond to anything AG or Freds may now come up with.

P :beagle:

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

Just focusing on a few facts that we are reasonably sure of...

If the DN is bad there can be no enforcement (Harrison), therefore the creditor must issue a new DN.

To issue a new DN, the creditor (or assignee) needs to ensure that they are able to deal with remedy; ie, the contractual position when the breach is put right. If the default is remedied per the DN, then S89 applies and the contract should continue as before.

However, your contract may already provide for this; ie, a term that states that the current balance can be assigned and the contract closed, assuming that the regs are observed. If it doesn't contain any such term, then I have no idea what the assignee can now do, other than sell the debt to a licenced creditor provider.

IMO, it is the OC that is at fault, and the debt should only have been assigned once the debt itself was beyond dispute.

I also looked at the Arrow Global code of practice (2009), which states that;

Each member shall:

a) Timely advise the consumer that the debt has been assigned.
b) Adhere to all relevant requirements under the Consumer Credit Act 2006 and any other relevant legislation.
c) In debt collection or trace activity comply with all the principles of this code.

So how they now adhere to b) above while trying to collect a debt which they cannot now enforce is really quite hard to understand.

[pandora]

Re: Contracts, Termination, Repudiation and Rescission

Thanks again LA for your kind observations and well received help .... what a confusing subject DNs are ... glad there are those who can decify here to help all of us novices !!!

Any other thoughts keep 'em coming !!!

P:beaglex

[basa48]

Re: Contracts, Termination, Repudiation and Rescission

In relation to Egg's non default ending of many thousands of agreements, what does the forum think of this comment from Lord Justice Moore-Bick (para 34):

"it is impossible for a party to terminate a contract, in the sense of discharging both parties
from further performance, whether by invoking a term which entitles him to do so or by
exercising his rights under the general law, and at the same time treat it as continuing,
since the two are inconsistent. Either the primary obligations remain for performance, or
they do not";

Taken from http://www.bailii.org/ew/cases/EWCA/Civ/2009/75.html

This case confirms that the starting position is that a contractual termination clause, however detailed, will not exclude an innocent party’s common law right to treat a contract as discharged and seek damages, following a sufficiently serious breach. Typically, the circumstances in which termination is permitted under the contract will be regarded as events that the parties have decided correspond with breaches that the common law would recognise as giving rise to similar rights.

[Garlok]

Re: Contracts, Termination, Repudiation and Rescission

Hi basa48,

There is also issue in the "Lambie" case where their Lordships also made reference to Common Law of Contract rights when the CCA was involved. The quote above as some of us have been trying to say for a while gives a good indictaion of the thinking of the senior courts when it comes to matters such as these. There have now been several quotes from the higher courts on here on both sides of the Law fence (Common/CCA) which say that exactly the same thing i.e. what matters is what the debtor has been led to believe by the actions of the creditor.

regards
Garlok

[diddydicky]

Re: Contracts, Termination, Repudiation and Rescission

In relation to Egg's non default ending of many thousands of agreements, what does the forum think of this comment from Lord Justice Moore-Bick (para 34):



Taken from http://www.bailii.org/ew/cases/EWCA/Civ/2009/75.html

This case confirms that the starting position is that a contractual termination clause, however detailed, will not exclude an innocent party’s common law right to treat a contract as discharged and seek damages, following a sufficiently serious breach. Typically, the circumstances in which termination is permitted under the contract will be regarded as events that the parties have decided correspond with breaches that the common law would recognise as giving rise to similar rights.

OR

It is inherent in the nature of a legally binding contract that each party expects to obtain the benefit of the bargain into which he has entered, or, if the contract is not performed, a right to recover compensation in the form of damages for the loss of that benefit. Accordingly, in a case where one party's breach is such as, in the words of Diplock L.J. in Hongkong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 Q.B. 26, to deprive the other of substantially the whole benefit which it was intended that he should obtain from the contract, the common law recognises the right of the injured party to treat the contract as discharged and to recover damages for the loss of the bargain. Such a breach is commonly described as "going to the root of the contract". That is all trite law, but it provides the underpinning, should it be required, for Mr. Boyd Q.C.'s submission that parties to a contract of this kind, or indeed to any contract, enter into negotiations in the expectation that if the one of them commits a breach which goes to the root of the contract in the sense just described, the other will be entitled to recover damages for the loss of his bargain. The parties may, of course, agree to depart from that position, but that is the point from which they start.
------------------------------- merged -------------------------------
In my view Mr. Dunning's submission fails properly to recognise the true nature of the contract. The primary purpose of Article 10 in the present case is to provide an agreed measure of compensation for breaches of contract by way of delay in delivery and deficiencies in capacity and performance which, although important, do not go to the root of the contract. For these the parties have agreed the payment of liquidated damages which are to be deducted from the final instalment of the price and to that extent their agreement displaces the general law, at least as regards the measure of damages recoverable for a breach of that kind. However, they have also agreed that there comes a point at which the delay or deficiency is so serious that it should entitle Gearbulk to terminate the contract. In my view they must be taken to have agreed that at that point the breach is to be treated as going to the root of the contract. In those circumstances the right to terminate the contract cannot sensibly be understood as anything other than embodying the parties' agreement that Gearbulk has the right to treat the contract as repudiated, with (subject to Mr. Dunning's alternative argument) the usual consequences. The same holds true in relation to the Yard's right to terminate the contract under Article 5.7. Although the parties may have agreed to exclude, in whole or in part, Gearbulk's right to recover damages for a repudiatory breach on the part of the Yard, I am unable to accept that they intended to create by their contract a situation which differed in its effect from that which would arise on the acceptance of a repudiation under the general law. Article 5.9 and Article 10 simply identify the circumstances in which one or other of the parties is entitled to treat the contract as discharged by the other's breach. In paragraph 88 of his judgment in Stocznia Gdanska S.A. v Latvian Shipping Co [2002] EWCA Civ 889, [2002] 2 Lloyd's Rep. 436 Rix L.J. expressed the view that where contractual and common law rights overlap it would be too harsh to regard the use of a contractual mechanism of termination as ousting the common law mechanism, at any rate against a background of an express reservation of rights. In this case I would go further. In my view it is wrong to treat the right to terminate in accordance with the terms of the contract as different in substance from the right to treat the contract as discharged by reason of repudiation at common law. In those cases where the contract gives a right of termination they are in effect one and the same.

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

Hi
Thought i would see what the OFT had to say about default notices being isued on contracturally terminated accounts. This is the reply.

Dear Mr Bard

Thank you for your e-mail of 21 March 2011 to the Office of Fair Trading (OFT).

In reference to your enquiry, I have spoken with our credit team who have provided the following information.

The creditor could issue a default notice or could continue with the termination provisions if there is no amount due on default. The creditor can serve a notice of default sums under Section 86E of the Consumer Credit Act while continuing with the termination procedure.

I hope this information proves helpful.

Yours sincerely

Gurpriya Tooray
Enquiries and Reporting Centre


This was my query


Dear Sirs

I wonder if you could answer this for me.
We have a member who has had his credit card terminated under the contractual term in his agreement, he is not nor has ever been in arrears.

Does this mean that if in the future he falls into arrears and breaches the payment arrangement the creditor will be unable to issue a default notice and terminate s the account is already terminated.

PeterBard

TCU



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[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

Presumably this means a "payment arrangement" is also regulated by the Act, otherwise a notice served under S87 makes no sense (the wording required by the 1983 Regs requires that DNs are served under regulated agreements).

I think it's a pity that creditors "terminate" agreements, because if they merely restricted credit while keeping agreements live we would not have these apparently contradictory positions. The point being that a lender "terminates" but actually doesn't because he still wants to be able to serve DNs down the line if the debtor "defaults" on an arrangement.

It seems that the lender isn't "terminating" at all, he's just restricting credit. Service of TNs is, in my view, hugely misleading if this is the case.

What a total mess the Act is. I used to think Mr Bennion was a genius...now I just think he was mental.

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

Presumably this means a "payment arrangement" is also regulated by the Act, otherwise a notice served under S87 makes no sense (the wording required by the 1983 Regs requires that DNs are served under regulated agreements).

I think it's a pity that creditors "terminate" agreements, because if they merely restricted credit while keeping agreements live we would not have these apparently contradictory positions. The point being that a lender "terminates" but actually doesn't because he still wants to be able to serve DNs down the line if the debtor "defaults" on an arrangement.

It seems that the lender isn't "terminating" at all, he's just restricting credit. Service of TNs is, in my view, hugely misleading if this is the case.

What a total mess the Act is. I used to think Mr Bennion was a genius...now I just think he was mental.

HI

I think the problem is that there is a basic missunderstanding of what termitaion of an agrement actually is.

As i said right at the begining of this thread a terminated agreement is not a void agreement the agreement still exists, it exists as a terminated agrement

Just because the contract is terminated and the terms under it no longer apply does not mean that statute does not apply to the loan. As long as there are liabilities left to be paid then it is a commertial transaction and still covered by statute.
A default notice is just a notice before action it does not need to be issued on a an active or unterminated account it can be issued at any time on any account that is regulated under the act.

The reason that it could not be issued on a default termination is because default termination is part of the enforcement as well as a remedy for the default, it is part of the default process. Therefore an inafecrtive default means an inafective termination.
The remedy that secton 89 offers in a case like this is mearly that enforcement is not commenced because the sum owing under the agreement is paid.

I know this is hard to undersatnd and the language is to an extent counter intuitive which makes it worse.

But given the vast amount of supporting evidence available i think it is time for some to forget previous missconseptions, accept the facts and move on.
Peter

[pt2537]

Re: Contracts, Termination, Repudiation and Rescission

I do believe the Court of Appeal is going to be addressing the contractual right to terminate outside of the act shortly.

If, as is expected, the CoA upholds s173 as preventing a party from using a term of the contract to escape the 1974 acts requirements then the right to terminate at a moments notice without following the acts formalities may well be resolved.

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

I do believe the Court of Appeal is going to be addressing the contractual right to terminate outside of the act shortly.

If, as is expected, the CoA upholds s173 as preventing a party from using a term of the contract to escape the 1974 acts requirements then the right to terminate at a moments notice without following the acts formalities may well be resolved.

HI Yes


The contractural termination of an open ended account is available within statute of course, courtessy of the european directive after 2 months notice. Which is i think a improvement on the previous situation where they could terminate, as you say at a whim.

I am not aware of the case you are refering to but it sounds very interesting.
Section 173 is of course what enables statute to regulate the contract.

Peter

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

HI

I think the problem is that there is a basic missunderstanding of what termitaion of an agrement actually is.

As i said right at the begining of this thread a terminated agreement is not a void agreement the agreement still exists, it exists as a terminated agrement

Just because the contract is terminated and the terms under it no longer apply does not mean that statute does not apply to the loan. As long as there are liabilities left to be paid then it is a commertial transaction and still covered by statute.
A default notice is just a notice before action it does not need to be issued on a an active or unterminated account it can be issued at any time on any account that is regulated under the act.

The reason that it could not be issued on a default termination is because default termination is part of the enforcement as well as a remedy for the default, it is part of the default process. Therefore an inafecrtive default means an inafective termination.
The remedy that secton 89 offers in a case like this is mearly that enforcement is not commenced because the sum owing under the agreement is paid.

I know this is hard to undersatnd and the language is to an extent counter intuitive which makes it worse.

But given the vast amount of supporting evidence available i think it is time for some to forget previous missconseptions, accept the facts and move on.
Peter

I suppose the questions that arise from this are;

1. Why are liabilities subject to CCA post-termination? The creditor terminates (properly or otherwise), the agreement ends, the liabilities are considered. There is no agreement (it is terminated), but the debtor agrees to a payment plan. Why is this assumed to be regulated, unless it is the subject of a new restricted-use credit agreement?
2. As we saw in the Pumkinhead judgement, the judge decided that the liabilities were not subject to CCA because the debtor renounced all its provisions. Is this the same as the creditor terminating the agreement and not getting the debtor to agree to a new restricted use credit agreement to repay the liabilities?
3. If an agreement is improperly-terminated via a bad DN, how is it that the creditor escapes S87(1)(a) (termination of agreements) by refusing to reinstate the agreement as it was prior to termination? The termination is now recognised as being ineffective in law, so how does the creditor escape his responsibilities by refusing to resurrect the agreement?
4. What exactly does S89 mean, if it doesn't mean that the debtor can remedy the breach and cause the creditor to set things back to how they were as if the breach had not occurred?

I would also reiterate the fact that a DN is not a fait accompli - although for sure it is a notice of intended action, it is also just as much an opportunity for the debtor to fix his breach and so avoid that action. This aspect seems to have been overlooked in much of this thread.

Keep up the good work

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

[quote=Lord_Alcohol;209477]I suppose the questions that arise from this are;

1. Why are liabilities subject to CCA post-termination? The creditor terminates (properly or otherwise), the agreement ends, the liabilities are considered. There is no agreement (it is terminated), but the debtor agrees to a payment plan. Why is this assumed to be regulated, unless it is the subject of a new restricted-use credit agreement?
2. As we saw in the Pumkinhead judgement, the judge decided that the liabilities were not subject to CCA because the debtor renounced all its provisions. Is this the same as the creditor terminating the agreement and not getting the debtor to agree to a new restricted use credit agreement to repay the liabilities?
3. If an agreement is improperly-terminated via a bad DN, how is it that the creditor escapes S87(1)(a) (termination of agreements) by refusing to reinstate the agreement as it was prior to termination? The termination is now recognised as being ineffective in law, so how does the creditor escape his responsibilities by refusing to resurrect the agreement?
4. What exactly does S89 mean, if it doesn't mean that the debtor can remedy the breach and cause the creditor to set things back to how they were as if the breach had not occurred?

I would also reiterate the fact that a DN is not a fait accompli - although for sure it is a notice of intended action, it is also just as much an opportunity for the debtor to fix his breach and so avoid that action. This aspect seems to have been overlooked in much of this thread.

Keep up the good work

All these questions are answered above

Peter

[mystery1]

Re: Contracts, Termination, Repudiation and Rescission

Recent CCA Successes

RBS/Tesco Personal Finance had issued a claim against our Client Mr ‘E’ for repayment of an unsecured debt in the sum of £7,800. We defended the action on the basis that although the original agreement was enforceable, the procedure for terminating the loan agreement had not been carried out correctly, and RBS/Tesco Personal Finance have now discontinued their claim which brings the matter to an end for our client.

M1

[jax50]

Re: Contracts, Termination, Repudiation and Rescission

Did this end here, or has the discussion moved to another thread..?